The banks are too slack in checking borrowers’ ability to pay, according to the Financial Supervisory Authority (Finanstilsynet). Now they want to make it harder for banks to give consumer loans.
In the proposed new guidelines the FSA emphasize that banks will have to check the borrower’s ability to repay debt more thoroughly than they do today.
– We have learned that several banks have weak procedures in this area. Among other things, it revealed a lack of procedures for checking customers’ ability to repay, says the director of the FSA, Morten Baltzersen, in a statement.
The Authority wants to reduce the risk of people taking out loans they are unable to repay.
Therefore, they include stricter requirements for documentation of credit ratings, a closer review of customers’ ability to pay instalments, and requirements for maximum total debt in relation to income.
Consumer loans accounted for about 3 percent of total household debt in 2016. Norwegian households have a high debt rate relative to income, and credit growth is higher than that of income.
Source: NTB scanpix / Norway Today
